The Compensation Of Decision Makers And The R&D Intensity:A Research Of The Governance Effect Of The Short Selling

On March 30,2010,Shanghai and Shenzhen Stock Exchange simultaneously issued a notice to start margin trading and short selling.Margin trading and short selling are not far away from us.At abroad,short selling is called "Short selling".The establishment of China's margin trading rules drew on the experience of many developed countries such as the United States.But after the bankruptcy of Lehman Brothers in September 2008,many people began to wonder whether the short selling would make the market more effective.At this point,national regulators,including the SEC of the US and the FSA of UK,were beginning to change the rules of short selling,to limit or even prohibit the short selling of specific stocks.In June 2010,the German government unilaterally banned the short selling of eurozone sovereign bonds and credit default swap transactions,claiming that the short selling led to excessive changes in financial product prices and threatened the operation of the entire financial market and the stability of the financial system.Since then,more and more scholars of Western countries began to study the impact of the restrictions of short selling on the efficiency of stock pricing and the stability of the security market.In addition,some scholars began to pay attention to the governance effect of the short selling on the behavior of the corporate in the stock market.As an important issue in the field of corporate governance,R&D intensity has always been the focus of scholars.In a certain degree,R&D intensity would have an impact on the level of enterprise innovation and thus the competitive advantage.This paper mainly discusses the governance effect of the short selling based on the R&D intensity of the enterprise.R&D intensity is a decision made by internal decision makers.Decision makers have to consider a wide range of factors in making such decisions.Based on the classical principal-agent theory and the hypothesis of economic man,the owner of the corporate motivates decision makers through the compensation(cash remuneration or equity,called as "the dominant benefit")to mobilize their enthusiasm to make effective decisions from the owner's point of view.The relationship between the compensation of decision makers and the the R&D intensity has been an old topic in the field of corporate governance.Most scholars took the compensation of decision makers as a corporate governance mechanism to study the relationship between the compensation and the R&D intensity.At present,there is no literature research on the moderating effect of the short selling on the above relationship.Based on the domestic published enterprises,this paper chooses the enterprises of Shanghai and Shenzhen Stock Exchange as the sample from March 31,2010 to January 31,2013,and the window period is two years before and after the enterprise became the subject of the short selling.And through emperical work,this paper tests the moderating effect of the short selling on the relationship between compensation and the R&D intensity.The results show that:(1)the dominant benefit of decision makers has a significant negative impact on the R&D intensity,and the invisible benefit of decision makers has a significant negative impact on the R&D intensity;(2)the yearly amount of short selling has a significant negative moderating effect on the relationship between the dominant benefit of decision makers and the R&D intensity,and an unsignificant negative moderting effect on the relationship between the invisible benefit of decision makers and the R&D intensity.This paper provides practical implications for enterprises to make decisions of R&D intensity.Enterprises should give full consideration to the effect of the dominant and invisible benefit of decision makers on the R&D intensity,and make full use of the governance effect of the short selling.